The Power of the High-Yield Savings Account
Alright y’all– let’s talk about high-yield savings accounts. These are still relatively new, so it’s understandable if you don’t know much about them. I didn’t understand the point until I dug in a little deeper, and then I ditched my traditional savings account as quickly as I possibly could. Today I want to see if I can convince you why you, too, should ditch your traditional savings account for one that can make you a lot more money while you’re sleeping.
When it comes to savings accounts, one of your top priorities should be interest rates. Traditional savings accounts typically offer minimal interest rates that barely keep pace with inflation. This isn’t a terrible thing, but it’s not much different than keeping your money under a pillow. High-yield savings accounts, on the other hand, offer significantly higher interest rates, allowing your hard-earned money to grow at a faster pace. I had a Chase savings account for a while and was receiving 0.002% interest on my money. Every month I would get an interest deposit of about 15 cents into my savings account. When I switched to SoFi, which gave me a 1.2% interest rate before my direct deposit came into play, I got $5 the first month. When my direct deposit activated the 4.3% interest, I got over $70. In ONE MONTH!!
While traditional savings accounts struggle to keep up with inflation, high-yield savings accounts provide a fighting chance. With higher interest rates, your money has a better chance of outpacing inflation and retaining its value.
Let’s look at an example.
Let’s say you have $20,000 in your savings account, you contribute $200/month, and the interest on it is 4%. In one year, you’ll make an additional $864 on it– just from interest! That’s about $72/month in free money.
Some people are hesitant to use high-yield savings accounts because they confuse them with CDs and think they’ll lock their money away. But unlike some long-term investments, high-yield savings accounts offer easy access to your funds whenever you need them. You can make withdrawals, transfer money, and manage your account seamlessly. It literally operates exactly like your traditional savings account, you just also get the perk of the higher interest rates.
When I was going back and forth about whether or not to switch to SoFi’s high-yield savings account, I have to admit I was a little nervous about something going wrong. Chase is a very reputable bank that I know I can trust. So why don’t they have high-yield accounts? Is it bad that SoFi doesn’t have any brick-and-mortar stores? My fears were alleviated when I learned about a little thing called FDIC. High-yield savings accounts, just like traditional ones, are typically backed by the Federal Deposit Insurance Corporation (FDIC). This means your deposits are insured up to the maximum amount allowed by law. You definitely want to make sure your bank is FDIC insured, but if/when it is, you can rest easy knowing that even if the unexpected happens, your money is protected.
Speaking of the unexpected… life is unpredictable, and having a safety net to fall back on is crucial. With a high-yield savings account, your emergency fund can grow faster, thanks to the higher interest rates. It's like giving your safety net a turbo boost, ensuring you're prepared for any curveballs life throws your way.
Not only that, it also puts you in a better situation when it comes to saving for those upcoming dreams. Whether you're saving for your honeymoon, a down payment on a house, or a shiny new gadget, a high-yield savings account can help you reach your goals faster. The higher interest rates mean your money grows more quickly, accelerating your progress. Embrace the exciting world of high-yield savings accounts…your future self will thank you for it.
Have I convinced you?
